BIR Ruling No. 029-14

January 23, 2014 BIR RULING NO. 029-14 RA No. 7279; BIR Ruling No. 109-13 Penguin Ville Homeowners Association, Inc. Blk. 2 Lot 9-10 Golden Acres Talon 5, Las Pias City Attention: Ma. Fe Reconalla President Gentlemen : This refers to the letter of Ma. Ana R. Oliveros, President of Social Housing Finance Corporation (SHFC) dated August 6, 2013, endorsing the sale transaction between Leonard B. Tempongko and Penguin Ville Homeowners Association, Inc. for exemption from the payment of Capital Gains Tax and other taxes in accordance with the Republic Act (RA) No. 7279, otherwise known as the "Urban Development and Housing Act of 1992". Documents submitted disclosed that Leonard B. Tempongko (TIN 164-390-010-000) is the registered owner of parcels of land covered by two (2) Transfer Certificates of Title (TCT), to wit: TCT No. Area (sq.m.) Tax Declaration No. 005-2013000033 1 348 E-017-24341 005-2013000034 2 502 E-017-24342 850 ==== issued by the Registry of Deeds for Las Pias City. The aforesaid properties are situated at Golden Acres Talon 5, Las Pias City. Penguin Ville Homeowners Association, Inc. (TIN 264-556-983-000), on the other hand, is a homeowner's organization duly registered with the Housing and Land Use Regulatory Board (HLURB). On December 1, 2012, the parties executed a Deed of Absolute Sale whereby the owner transferred and conveyed the subject properties to Penguin Ville Homeowners Association, Inc. at an agreed price of Two Million Forty Thousand Pesos (P2,040,000.00). Pursuant to the certification issued by SHFC, the above mentioned properties covered by TCT Nos. 005-2013000033 and 005-2013000034 actually comprise a Community Mortgage Program (CMP) Project and shall be proportionately distributed to the association's qualified member-beneficiaries. 3 For this purpose, Penguin Ville Homeowners Association, Inc. secured a housing loan under the CMP, a financing assistance program of the SHFC a subsidiary of the National Home Mortgage Finance Corporation (NHMFC). cSCADE In support of its request, Penguin Ville Homeowners Association, Inc. has completely submitted on August 30, 2013 the following documents: 1) SHFC letter application for tax exemption; 2) Certification of the President of the SHFC that the subject property qualifies and is actually a CMP project; 3) Copy of the Letter-Guaranty; 4) Certified true copy of the Deed of Absolute Sale to the Community Association; 5) Certified True Copy of the Articles of incorporation of the Community Association; 6) Certified True Copy of the Masterlist of Qualified Beneficiaries duly certified by the SHFC; 7) Certified True Copies of the TCT and Latest Tax Declaration of the Property Sold to the Community Association; 8) Location Plan of the Lot Sold to the Community Association; 9) TIN ID/BIR Certificate of Registration of the seller and the Homeowner Association; and 10) Other pertinent documents. In reply, please be informed that pursuant to Section 32 of RA No. 7279, pertinent portions of which state that: "Sec. 32. Incentives. To encourage its wider implementation, participants in the CMP shall be granted with the following privileges or incentives: xxx xxx xxx (b) Properties sold under the CMP shall be exempted from the capital gains tax; and" the landowner who sold his properties for use in a socialized housing project is exempt from the payment of capital gains tax. Such being the case, the sale by the landowner to Penguin Ville Homeowners Association, Inc. of the properties covered by TCT Nos. 005-2013000033 and 005-2013000034 is exempt from the capital gains tax. (BIR Ruling No. 109-13 dated March 21, 2013) Upon issuance of this letter of exemption, and upon registration of the document of sale, a lien on the Certificate of Title of the land to be issued in the name of the Homeowners Association shall be caused to be annotated by the Register of Deeds having jurisdiction over the property, to the effect that the said property shall be used for socialized housing pursuant to RA No. 7279. (BIR Ruling No. 109-13 dated March 21, 2013) DSHTaC However, the documentary stamp tax is not one of the taxes covered by the tax exemption clause in Sec. 20 of RA 7279. Accordingly, the owner is liable to pay the documentary stamp tax on the documents conveying the afore-stated property imposed under Section 196 of the Tax Code of 1997, based on the consideration contracted to be paid for such realty or its fair market value determined in accordance with Section 6 (E) of the said Code, whichever is higher. (BIR Ruling No. 109-13 dated March 21, 2013) It is, however, understood that this ruling is never intended and shall not be construed as giving authority to the concerned Register of Deeds to effect transfer of the land title in the name of the buyer without the necessary certificate of authority to register issued by this Bureau. In this regard, this ruling shall be presented to the Revenue District Office (RDO) concerned in order for the latter to issue the Certificate Authorizing Registration (CAR). The CAR shall only be issued after the submission of the requirements provided under RMO15-2003. Notwithstanding the foregoing, the Bureau of Internal Revenue shall conduct verification and post-audit that the actual occupants of the property transferred under the CMP are qualified beneficiaries and therefore, the seller is entitled to exemption from capital gains tax or income tax imposed under the Tax Code of 1997. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered as null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue ANNEX Penguin Ville Homeowners Association, Inc. Blk. 2 Lot 9-10 Golden Acres Talon 5, Las Pias City Blk. Lot No. Total Area Name of Beneficiary No. (sq.m.) 1 Elvie P. Ituralde 1 1 33.72 2 Evalyn Javier 2 2 33.72 3 Merlina Cuenca 3 3 33.72 4 Jennalyn Cuenca 4 4 33.72 5 Elevita Damiano 5 5 33.72 6 Sofia A. Cuenca 6 6 33.72 7 Jamie Joy Teston 7 7 33.72 8 Alfredo Dojoles 8 8 33.72 9 Jose Antonio Faire Jr. 9 9 34.72 10 Victor E. Reconalla 10 10 33.72 11 Jake Vargara 11 11 33.72 12 Robin Tamayo 12 12 33.72 13 Katrina Vergara 13 13 33.72 14 Jennifer Sardan 14 14 33.72 15 Ysmael Deligero 15 15 33.72 16 Ralph Ysrael Deligero 16 16 34.72 17 Ryan Faire 17 17 34.22 18 Richard Poylong 18 18 34.22 19 Ma. Fe Reconalla 19 19 34.22 20 Sionida Makiputin 20 20 34.22 21 Elizar Ramirez 21 21 34.22 22 Ana Marie Vergara 22 22 34.22 23 Rodel Aquino 23 23 34.22 24 Ma. Luisa Aquino 24 24 34.47 25 Felix Yabo 25 25 34.22 Footnotes 1. Formerly: TCT No. (268547) T-35010-A. 2. Formerly: TCT No. (268546) T-35009-A. 3. See Annex for the masterlist of qualified beneficiaries.